Rating action

Scope Ratings GmbH (Scope) has today upgraded the Republic of Lithuania’s long-term local- and foreign-currency issuer and senior unsecured debt ratings to A+, from A, and revised the Outlooks to Stable, from Positive. The short-term issuer ratings have been upgraded to S-1+, from S-1, in foreign and local currency, with the Outlooks revised to Stable, from Positive.

The upgrade of Lithuania’s credit ratings reflects the country’s strong growth performance, benefiting from structural improvements resulting from a robust structural reform agenda and sizeable EU-funded public investments. These will allow for a continued convergence towards euro area income levels and further enhance the country’s resilience to exogenous shocks. The upgrade revision furthermore reflects Lithuania’s sound fiscal fundamentals, resulting from a strong track record of fiscal prudence, and characterised by moderate, albeit gradually rising, debt levels and robust debt affordability.

The main credit challenges reflect: i) exposure to external shocks, given the Lithuanian economy’s comparatively small size, still comparatively moderate income levels, elevated openness and border with Kaliningrad and Belarus; and ii) adverse demographic trends and high defence spending commitments that add long-term pressures to the fiscal trajectory.

For the updated rating report, click here.

Key rating drivers

Robust medium-term growth prospects, strengthened external resilience. The upgrade of Lithuania’s credit rating is supported by the country’s strong economic performance, which has driven a significant convergence with euro area averages and enhanced economic resilience. In 2024, Lithuania’s GDP per capita reached 63% of the euro area average, a 22pp increase since 2015. When measured in purchasing power standards, GDP per capita stood at 84% of the euro area average, up 14pps over the same period.

Following moderate output growth of 0.3% in 2023, the Lithuanian economy rebounded sharply in 2024, expanding by 2.8%, driven by robust private demand and strong services exports. Real GDP grew by 3.1% year-on-year in the first half of 2025, with private consumption staying robust on the back of wage gains, though somewhat weakened by increased excise taxes and persistent geopolitical risks.. As of Q2 2025, quarterly GDP in Lithuania was up by 13% relative to Q4 2019 (in real terms, seasonally adjusted), significantly outperforming Latvia (A-/Stable, 9%), Estonia (A+/Stable, 1%), and the euro area aggregate (6%) over the same period.

Looking ahead, output growth is expected to remain solid, with GDP forecast to rise by 3.0% in 2025 and 2.9% in 2026. This outlook is supported by resilient household consumption, underpinned by strong labour market conditions and real wage growth, as well as a recovery in private investment - particularly in residential construction - fuelled by easing funding conditions and accelerating lending activity.

The high medium-run growth potential of around 2.5% annually is supported by a robust structural reform agenda and effective absorption of substantial EU funding allocations. Under the Recovery and Resilience Plan (RRP) and the EU cohesion policy programme, Lithuania is set to receive EUR 10.1 billion over 2021–2027, equivalent to about 14% of 2024 GDP. The RRP includes targeted reforms to address long-standing structural challenges, such as skills shortages, with a focus on education and vocational training.

The country’s strong economic performance has also led to notable improvements in its external position. The current account surplus rose to 2.5% of GDP in 2024, up from 1.1% the previous year, driven by large surpluses in services exports, particularly in financial and IT services. This reflects Lithuania’s ongoing diversification towards high value-added services.

The current account surplus is expected to moderate in the coming years, as rising defence expenditures and high public investment boost imports. Recent changes in US trade policy and subdued demand from key euro area trading partners should also weigh on export growth. Nevertheless, Lithuania’s favourable real effective exchange rate position and resilient non-cost competitiveness are expected to partially cushion the impact of US trade tariffs on export growth.

Lithuania’s net international investment position has improved significantly, reaching a slight net creditor status of 0.5% of GDP by end-2024, up from a net debtor position of -23.5% at end-2019. Over the same period, the country’s net external debt turned negative, improving from 11.7% to -11.8%. Looking ahead, Scope expects continued improvements in Lithuania’s external balance sheet, supported by healthy, albeit moderating, current account surpluses and sustained inflows of EU funds and foreign direct investment. These factors will further strengthen the country’s resilience to external shocks.

Moderate public debt levels, commitment to fiscal prudence and strong debt affordability. The upgrade of Lithuania’s ratings furthermore reflects the country’s sound fiscal fundamentals. The general government deficit widened to 1.3% of GDP in 2024, up from 0.7% in the previous year, although remaining well below initial government estimates (3.0%). This rise resulted from increases in public wages, interest expenditure and social spending, as well as expenditure initially scheduled for the previous year.

The deficit is projected to increase to 2.6% of GDP in 2025 and 2026. This deterioration primarily stems from persistent inflation related pressures on public sector wages and social expenditures, alongside a ramp-up in public investment. These spending pressures will be only partially offset by continued strong revenue growth. Robust wage growth is supporting personal income tax receipts and social security contributions, while VAT and excise duty revenues are also growing following recent rate hikes.

Rising defence expenditures will weigh on the fiscal outlook, rising from 3.2% of GDP in 2024 to about 5.5% over the medium-term. Importantly, however, this additional spending should be partly funded through new revenue-side measures adopted over 2024-25. In spring 2025, Lithuanian authorities introduced a new fiscal package which included amendments to both corporate and personal income tax frameworks. These changes are projected to generate around 0.5% of GDP in additional annual revenue over 2026–2027.

Scope expects the fiscal deficit to moderate in subsequent years and to average 2.1% of GDP over 2027-30 – thus remaining within the 3% of GDP Maastricht threshold, despite Lithuania having been granted additional budgetary flexibility to increase defence spending under the national escape clause within EU fiscal rules. This projected trajectory accounts for expectations of robust revenue growth and is underpinned by Lithuanian authorities’ strong track record of fiscal prudence, as reflected in pre-pandemic budgetary surpluses and recent consolidation efforts. General government revenue stood at 38.2% of GDP in 2024, up 3.2pps from 2019, reflecting efforts from Lithuanian authorities to broaden the tax base and improve compliance. It is expected to continue increasing over coming years, gradually converging towards euro area averages (46.5% of GDP in 2024), notably thanks to policies agreed under Lithuania’s RRP.

Lithuania’s general government debt-to-GDP ratio is among the lowest in the euro area, at 38.2% at end-2024. It is seen remaining on a steady increasing trend over the medium-term, rising to around 47% by YE 2028 before stabilising close to this level in subsequent years – thus remaining moderate relative to euro area peers. This trajectory is anchored by prospects of robust nominal growth, still-moderate interest payment burden and declining primary deficits. Importantly, Scope expects Lithuania’s debt-to-GDP ratio to remain below the 60% Maastricht threshold even under a stressed scenario of durably weaker economic growth and looser fiscal stance.

Lithuania is expected to retain robust debt affordability over coming years, with net interest payments forecast to rise to 3.8% of general government revenue by end-2030 from the impact of durably higher market rates – a manageable 1.7 pp increase from 2024. A favourable debt structure and smooth refinancing profile should anchor gross financing needs at moderate levels (at around 8-9% of GDP over 2025-30), while prudent liquidity management practices and access to lending under the EU’s SAFE programme (for a maximum amount of EUR 8.8bn) under very favourable terms (with a maximum duration of 45 years and a 10-year grace period for principal repayments) will support funding flexibility over coming years.

Rating challenges: exposure to external shocks and longer-term demographic pressures

Lithuania is a small and very open economy, with the export and import sectors accounting for around 75% of GDP each. This, coupled with still-moderate wealth levels (GDP per capita of EUR 27,150), exposes Lithuania to external shocks. This vulnerability is exacerbated by the present environment of heightened geopolitical tensions following Russia’s invasion of Ukraine in February 2022. While Scope assesses direct military risks from Russia as low due to Lithuania’s strong international alliances, the country’s geographical proximity to Russia and strategic location on the Baltic Sea make it one of the EU countries most exposed to spillovers from the conflict, including to broader security challenges such as cyber risks or disinformation campaigns. While Scope assesses the country’s preparedness to such hybrid forms of aggression positively compared to other Central and Eastern European peers, a protracted conflict adds significant uncertainty to the medium-term macroeconomic and fiscal outlooks.

Additionally, Lithuania’s ratings are constrained by adverse demographic trends, which are likely to weigh on the longer-term economic and fiscal outlooks. The country’s working-age population is expected to decline by an average of 1.4% annually over 2025-30¹. While demographic challenges were temporarily alleviated in recent years by large inflows of Ukrainian refugees, an ageing population is expected to exacerbate pressures in the labour market, where labour shortages already constitute a key bottleneck to output growth and risk fueling further wage increases, in turn potentially eroding the country’s external competitiveness. Adverse demographic trends are furthermore a challenge for fiscal sustainability in the long run. The IMF estimates the net present value of changes in healthcare and pension spending through 2050 at above 75% of GDP, underlining the need for continued structural reform².

Rating-change drivers

The Stable Outlook reflects Scope’s view that the risks Lithuania faces over the next 12 to 18 months are balanced.

Upside scenarios for the ratings and Outlooks are if (individually or collectively):

1. Convergence towards euro-area income levels progressed significantly, such as via material progress in economic diversification and productivity growth.
    
2. The external position remained on an improving trajectory, such as via sustained current account surpluses, further enhancing economic resilience.
    
3. Fiscal fundamentals improved materially, placing the debt-to-GDP ratio on a solid declining trajectory over the medium run.

Downside scenarios for the ratings and Outlooks are if (individually or collectively):

1. Geopolitical risks increased, undermining macroeconomic stability.
    
2. Fiscal fundamentals weakened materially, resulting in a significant rise in the debt-to-GDP ratio over the medium run.
    
3. Macroeconomic imbalances increased, weakening growth prospects.
    
4. External and/or financial sector vulnerabilities increased substantially.

Sovereign Quantitative Model (SQM) and Qualitative Scorecard (QS)

Scope’s Sovereign Quantitative Model (SQM) provides a first indicative credit rating of ‘aa-’ for Lithuania. This ‘aa-’ first indicative rating receives a further one-notch uplift from the SQM’s reserve-currency adjustment and no negative adjustment from the political-risk adjustment. This sees a final SQM indicative credit rating of ‘aa’ for Lithuania. On this basis, the final SQM quantitative rating of ‘aa’ is reviewed by the Qualitative Scorecard (QS) and can be adjusted by up to three notches depending on Lithuania’s qualitative credit strengths or weaknesses compared against a peer group of sovereign states identified by the SQM.

Scope identified the following QS relative credit weaknesses of Lithuania: i) macro-economic stability & sustainability; ii) long-term debt trajectory; iii) resilience to short-term external shocks; iv) social factors; and v) governance factors. Conversely, Scope did not identify QS relative credit strengths for Lithuania. On aggregate, the QS generates a two-notch negative adjustment affecting Lithuania’s credit rating, resulting in the final A+ long-term ratings.

A rating committee has discussed and confirmed these results.

Environment, social and governance (ESG) factors

Scope explicitly factors in ESG issues in its ratings process via the sovereign-rating methodology’s stand-alone ESG sovereign-risk pillar, which holds a significant 25% weight under the quantitative model (SQM) and 20% weight under the methodology’s qualitative overlay (QS).

With respect to environmental factors, Lithuania displays favourable scores in the SQM, reflecting comparatively moderate levels of CO2 per unit of GDP, a low footprint of consumption compared to available biocapacity, and favourable marks as regards its exposure and vulnerability to natural disaster risks, which balance relatively elevated levels of greenhouse gas emissions per capita. Lithuania’s QS evaluation on ‘environmental factors’ is ‘neutral’ against a peer group of countries. Lithuania has achieved significant progress in the development of renewable energies, whose share in gross final energy consumption amounted to nearly 32% in 2023 (above an EU average of 26%). Lithuanian authorities aim to raise this share to 50% by 2030. Still, reducing the carbon footprint of the economy has proven challenging in recent years, especially given elevated emissions in the transport sector.

Regarding social factors, Lithuania receives a strong score in the SQM model for labour-force participation but weak marks on income inequality and on the old-age dependency ratio. The complementary QS assessment of ‘social factors’ is ‘weak’ compared to a peer group of countries. This reflects challenges related to demographic trends and elevated poverty and exclusion risks, which remain markedly above EU averages.

The complementary QS assessment of ‘governance factors’ is ‘weak’ compared to peers to account for Lithuania’s comparatively heightened exposure to spillover from the Russia-Ukraine war. External security risks for Lithuania have increased materially since the escalation of the Russia-Ukraine war, though NATO and EU memberships strongly limit the risk that the conflict will expand into the Baltic region. Under governance-related factors in the SQM, Lithuania performs very strongly relative to peers, in line with high scores under the World Bank’s Worldwide Governance Indicators. Policymaking has been effective and enjoyed broad continuity. EU and euro area memberships also enhance the quality of Lithuania’s macroeconomic policies and macroprudential framework. Prime Minister (PM) Gintautas Paluckas (social-democrat) resigned in July 2025 in the wake of a corruption scandal, leading to the rest of the cabinet stepping down. Finance Minister Rimantas Šadžius was appointed as acting PM pending formation of a new government. Former Minister of Social Affairs and Labour Inga Ruginienė was elected by parliament as new PM-designate in late August, and is poised to lead a renewed centre-left coalition government. Scope expects broad policy continuity from the new government.

Rating committee
The main points discussed by the rating committee were: i) Lithuania’s economic outlook and medium-term growth potential; ii) public finance risks, including fiscal framework and debt dynamics; iii) external economic risks, including effects of potential US tariffs; iv) financial stability and non-financial sector balance sheet developments; v) ESG considerations; and vi) peer developments.

Rating driver references
1. European Commission - 2024 Ageing Report. Economic and Budgetary Projections for the EU Member States (2022-2070)
2. International Monetary Fund, Fiscal Monitor, April 2025

Methodology
The methodology used for these Credit Ratings and/or Outlooks, (Sovereign Rating Methodology, 27 January 2025), is available on scoperatings.com/governance-and-policies/rating-governance/methodologies.
The model used for these Credit Ratings and/or Outlooks is (Sovereign Quantitative Model Version 4.1), available in Scope Ratings’ list of models, published under scoperatings.com/governance-and-policies/rating-governance/methodologies.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions – Credit Ratings, Ancillary and Other Services’, published on scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at scoperatings.com/governance-and-policies/regulatory/eu-regulation. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): registers.esma.europa.eu/cerep-publication. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on scoperatings.com/governance-and-policies/rating-governance/methodologies.
The Outlook indicates the most likely direction of the Credit Ratings if the Credit Ratings were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The Credit Ratings were not requested by the Rated Entity or its Related Third Parties. The Credit Rating process was conducted:
With Rated Entity or Related Third Party Participation      YES
With access to internal documents                                   YES
With access to management                                            YES
The following substantially material sources of information were used to prepare the Credit Ratings: public domain and the Rated Entity
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting these Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and/or Outlooks and the principal grounds on which the Credit Ratings and/or Outlooks are based. Following that review, the Credit Ratings and/or Outlooks were not amended before being issued.

Regulatory disclosures
These Credit Ratings and/or Outlooks are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and/or Outlooks are UK-endorsed.
Lead analyst: Brian Marly, Senior Analyst
Person responsible for approval of the Credit Ratings: Eiko Sievert, Executive Director
The Credit Ratings/Outlooks were first released by Scope Ratings in January 2003. The Ratings/Outlooks were last updated on 20 September 2024.

Potential conflicts
See scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest disclosures related to the issuance of Credit Ratings, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties.

Conditions of use / exclusion of liability
© 2025 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Fund Analysis GmbH, Scope Innovation Lab GmbH and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5, D-10785 Berlin. Public Ratings are generally accessible to the public. Subscription Ratings and Private Ratings are confidential and may not be shared with any unauthorised third party.